The IT industry billing model is being challenged by a former Infosys Ltd executive Mr. Phaneesh Murthy, by charging for results instead of basing fees on the time and labour put in by the huge staff working for India’s big firms.

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According to him, Outcomes-based billing, which is growing as a share of revenue all across the industry is certainly to appeal to clients with less-certain budgets in a tough economy.

The customer pays less, if the services don’t deliver an agreed-upon result, such as reducing the cost of processing a loan or cutting the reject rate in an auto parts factory. But the profit margin for IT companies are also boosted up with the strategy, raising questions about which model is better for customers.

Although the time based billing model has been working well for most of the IT Giants but off-late they have been facing stiff competition from smaller players who are offering much more convincing pricing which is based on the amount of work done and not how many people were involved in doing it.